Although it can be upsetting to think about, deciding what you want to happen with your assets after you pass is something everyone should be thinking about. By not having a plan in place, it can make it more challenging for your loved ones to gain access to your assets. It could even restrict their ability to carry out your wishes on things like your health care treatment. This article will give you an in-depth look at what you may consider when it comes to estate planning. Let’s start by going over some common estate planning documents and what they mean.

What is a Financial Power of Attorney (POA)? This is a legal document that grants a trusted agent/attorney in fact (someone you select) the authority to act on behalf of the principal (you) in financial matters. In other words, if you were to become incapacitated, who could pay your bills and manage your bank accounts? There are different types of Financial POA (consider consulting with legal counsel to see what’s right for you). The time a POA goes into effect can vary. The most common is a POA that goes into effect upon its execution, meaning the agent/attorney in fact can perform the powers granted in the POA immediately.  Another type of POA is one that would only go into effect upon a specific event having taken place, such as when the principal becomes incapacitated, often referred to as a “springing” POA.  If/when you have executed a POA, please share this information with your banker or financial advisor so they can have a copy of it included with your account(s).

What is a Healthcare Power of Attorney (HCPA)? This is a legal document that grants a trusted agent the authority to act on behalf of the principal-agent in medical matters. In other words, who can communicate with your doctor or healthcare provider?

What is a Living Will? This is a written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent. Think of things like use of ventilators, CPR/DNR, feeding tubes, blood transfusions and organ donations.

Now with an overview of these three documents, I hope you can see how crucial they are and the potential consequences if you do not have one in place. Now let’s go over the three ways in which your assets can pass.

1. By Title: a Title is a legal document that shows who owns specific properties and assets. For example, when you buy land, a house or open a bank account, you become the owner of those assets and their corresponding titles. There are a few different types of asset titling you will want to consider when developing your estate plan.

• • Individual ownership: This means you own an asset in your name alone and it will become part of your estate after passing. These assets will go through the usual probate process.
  • Joint ownership: This means you own an asset with someone else (typically a spouse or family member). It also often entails the “right of survivorship.” This means that if one owner passes away, the surviving owner automatically inherits the asset.
  • Tenancy in common: this is specific to real estate properties and land. In these cases, each owner may control an equal or different percentage of the total property. There is no right of survivorship meaning when a tenant in common dies, their share of the property passes to their estate.

2. By Beneficiary: a beneficiary is a person or entity that you legally designate to receive the benefits from your financial assets. Assets like life insurance policies, retirement accounts and payable-on-death bank accounts, will allow you to designate beneficiaries. All Pay on Death (think bank accounts) and Transfer on Death (think investments) assets pass directly to the designated individuals without going through probate.

3. By Estate Plan: There are a few ways this can go based on how much planning you do.

• • Intestate: This will happen when there is no plan in place. This means your asset distribution will follow the state laws where your closest descendent lives.
  • Will: This is a basic estate planning document. Includes a set of instructions for probate court. This document will name a personal representative or executor. This will also be a place for you to name a guardian for any minor child.
  • Revocable Living Trust: This is more advanced estate planning document that plans for disability and death. It also ensures probate avoidance as assets are titled in trust name.
  • Real estate options:
    • Life estate: is a property that an individual owns and may use for the duration of their lifetime.
    • Transfer on death deed (TODD) is a legal document that transfers all property (land, everything permanently attached to it, and all the interests, benefits, and rights inherent to the ownership of real estate) upon the death of the owner and will avoid probate.

Now that you have an idea of some of the ways you can transfer your assets you are probably wondering which plan is right for you. Well, that depends on a variety of factors including:

• Family Dynamics
• Farming heirs verses non-farming heirs
• Protecting assets from nursing home expenses / Medicaid
• Privacy
• Estate equalization – life insurance
• Probate verses probate avoidance
• Net worth

It is important to sit down with a team to discuss your family dynamics, asset goals and concerns. Estate planning is no longer one and done; laws, assets, and families change which is why it is so important to update regularly.

We hope this article gives you a better understanding of the different components that go into estate planning. As a reminder, we are not giving financial advice, just simply providing information. Ready to start planning? Reach out to your trusted estate planner or financial advisor today!